LG Display Q1 2025 Earnings Call Transcript

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April 24, 2025
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Moderator

Good morning and good evening. Thank you all for joining the conference call for the LG Display Earnings Results. This conference will start with a presentation followed by a Q and A session. Now we will begin the presentation on LG Display's First Quarter of Fiscal Year twenty twenty five Earnings Results.

Moderator

Good afternoon. I'm Brian Ho, in charge of IR team at LG Display. On behalf of the company, thank you all for joining us today in our first quarter twenty twenty five earnings call. Today, I'm joined by our CFO, Kim Seong Hyun Cho Seung Hyun, who is the VP of Business Management Kim Kyu Dong, VP in charge of Finance Lee Ki Young, in charge of Business Intelligence Kim Jong Deok, VP of Large Display Planning and Management An Yu Shin, in charge of Medium Display Planning and Management Baek Seung Yong, in charge of Small Display Planning and Management and last but not least, Sun Ki hwan, VP of Auto Marketing. This call will be conducted in both Korean and English.

Moderator

And for more details, please refer to the provisional earnings that was just disclosed or the IR Events section on the company's website. Also before we begin, please take a moment to read the disclaimer. As a reminder, please note that today's results are based on consolidated IFRS standards prepared for your benefit and have yet to receive an audit by an outside auditor. Let me start by running through the business results for Q1 of twenty twenty five. Despite the usual seasonality seen during the first quarter across different product segments, driven by OLED centric business structural upgrade coupled with $1 FX impact adding to the positive, revenue reported a solid KRW6.653 trillion, which is an increase of 15% on an year over year basis.

Moderator

Coupled with increase in revenue share of our OLED products following business structural upgrades and stringent cost savings and operational efficiency activities continuing, despite it being a slow season and unlike typical trends seen in the past, operating profit reported KRW33.5 billion, sustaining the profit making streak since last quarter. This is an improvement of KRW509.2 billion on a year over year basis and KRW1131.8 billion versus Q1 of twenty twenty three, which is quite noteworthy in that we were able to generate profit in the first quarter for the first time in eight years, except for the special period during the COVID pandemic. Q1 EBITDA was KRW 1,231,300,000,000.0 with EBITDA margin rate at 20%, which is at its highest since Q3 of twenty twenty one. Next is area shipment and ASP per square meter. Area shipment in Q1 was down 19% Q on Q on the back of seasonality impact on mid to larger panels, while on a year over year basis driven by panel shipment expansion for OLED TV and notebooks, there was 1% increase.

Moderator

ASP per square meter recorded $8.00 $4 which is down by 8% Q on Q. Considering how prices tend to fluctuate during the first quarter, the decline was very much mitigated, thanks to robust OLED performance. Moving on to product revenue mix. On subdued seasonality, mobile and others revenue dipped eight percentage points Q on Q reaching 34%, while revenue share of other product segment expanded on a relative basis. IT segment revenue share was up seven percentage points Q on Q, recording 35%, underpinned by increase in shipment of OLED panels for IT.

Moderator

TV segment revenue was flat Q on Q at 22%, while auto segment revenue mix increased one percentage point Q on Q accounting for 9%. OLED mix out of total revenue increased eight percentage points year on year reaching 55% as we continue to see expanded outcome from the company's transformation of OLED centric business portfolio. Next is financial position and key metrics. Cash and cash equivalent as stated in Q1 financial statement is KRW982.3 billion. But if we were to include back cash held by China's Guangzhou ACD plant, which has been classified under assets held for sale, in terms of actual cash and cash equivalents that the company owns, it will amount to KRW 2,372,800,000,000,000.0.

Moderator

Next is Q2 guidance. Generally, we see area shipment to uptrend during the second quarter, but following discontinuation of LCD TV business, we expect second quarter area shipment to decline by around mid-twenty percent. And conversely, ASP per square meter is expected to rise by around 20% level. Next, I invite our CFO, Kim Seong Hyun, to run through the highlights. Good afternoon.

Moderator

I'm Kim Seong Hyun, the CFO. Thank you all for joining our earnings call today. Aside from uncertainties in the downstream market, various factors continued to emerge such as the shifts in the global trade environment. Although we faced heightened level of volatilities in the business backdrop, we were able to drive meaningful results by way of sustaining the profit making streak even during the first quarter, which is known to be a slow season. This is a result of our strategies that solidified our fundamentals, including the OLED centric structural upgrades, rigorous cost innovations, which gradually drove better performance.

Moderator

Although external uncertainties may persist for the time being, we are beginning to see tangible results from the efforts that we've placed behind strengthening core competitiveness. And as such, we will continue to endeavor to achieve a turnaround in annual profit and further grow the size of that profit. Next, moving on to plans and strategies for each business domain. OLED for mobile has won greater trust from the customers and based on stronger production capabilities, we've been able to continuously expand our presence in the high end market. Going forward, underpinned by competitive capabilities in technology and stable supply, we plan to enhance core competitiveness such as quality and cost to drive and sustain shipment expansion.

Moderator

Also by responding nimbly to fast changing market, we will prepare in a structured way to be ready for future technologies. For the medium IT segment, we will be closely monitoring how the market moves and be agile in responding to changes in the downstream market. In IT OLED, there is clear and distinctive user value that Tandem OLED offers with its outstanding performance and durability features including low power, longer life and high luminance. Thus, we expect there to be year over year growth in shipment in 2025. And supported by technological leadership and stable mass production experience that's been accumulating over the years, we will further solidify our market position and effectively respond to changes in the environment.

Moderator

In IT LCD segment, we will leverage differentiated high end LCD technologies including IPS Black and next generation Oxide to deliver optimized products that meet customer needs in each product segment. And by collaborating with global top tier customers who are spearheading the high end segment of the market, we will respond to competition and drive results. Also, rigorous cost based innovation and operational efficiency efforts, we plan to sustain bottom line enhancement. In large panel business, following the closing of sale of Guangzhou LCD TV plant, revenue from large panel may start to decline starting the second quarter of this year as LCD TV revenue will no longer be captured. But through this strategic decision, we are able to place greater focus on OLED centric structural upgrades.

Moderator

For large OLED business, underpinned by distinctive value of OLED, we are solidifying our market presence in the high end segment as we maintain close collaboration with global customers in order to expand differentiated and premium product portfolio, including gaming monitors and Gen four OLED TVs whose values such as low power and high luminance are even more improved, we expect positive performance hence will follow. We will also continue to run efficient operational strategy and cost cutting efforts to respond nimbly to changing demand and consequently drive mid to longer term volume growth coupled with quality driven growth accompanied with profitability Next is auto business. Although volatility can be spotted across the overall auto market, in vehicle display adoption continues to expand and accelerated shift towards larger sized panels works to the advantage of the demand for our core products, OLED and LTPS LCD. For the auto business, we will fortify our position as global number one in terms of differentiated products and technology portfolio, which includes plastic OLED, ATO, high end LTPS LCD. And coupled with sustainable growth, we plan to build up a stable earnings structure.

Moderator

Lastly, on investment activities. Investment last year amounted to KRW2.2 trillion and investment in 2025 is expected to be around mid to low KRW2 trillion in line with the communication made last quarter. We maintain profit focused business operations and as we are mindful of changing external environment and ensuing fluctuations in demand, we adhere to the principle of keeping to a conservative stance when it comes to reviewing and running the investments. We will fully maximize the use of our infrastructure that we currently own and be prudent in making CapEx spend and profitability will be of utmost priority when we make new investment decisions in the future. Thank you.

Moderator

This ends the key highlights for the first quarter of twenty twenty five earnings. We will now begin the Q and A. Operator, please proceed.

Moderator

The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question.

Moderator

Thank you very much for taking my question. My first question, I would like to understand as to whether there are any changes that you are able to identify on the in the downstream market as well as in your customers with regards to The United States tariff that is quite hotly debated of recent and also would like to know as to how LG Display could respond to such development? Second question is, as per the disclosure made on April 11, there was a disclosure on the sales proceed with regards to the sale of LCD TV plant at Guangzhou. Is there any information that you could update us on? This is the CFO.

Moderator

I will take your question. With regards to the imposition of The United States tariff, I understand that the direction going forward is towards imposing such tariffs. As you would appreciate, a tariff policy does not singly target the tariff per se. There are multiple issues that are relevant in terms of the relationship that a country has with another. And I believe that tariff policy is used as a means to deal with those multiple array of issues.

Moderator

In a nutshell, what I mean to say that there is quite a bit of volatility that is embedded in the implementation of the tariff policy per se. And as you would know, basically it is rare that our product would directly be exported into The U. S. Market. As you know, the companies that are directly facing the tariff issue are the set makers and we are hence very closely monitoring as how these set makers will determine their production base going forward and the strategies related to their production base.

Moderator

But as far as we know and based upon what we had researched as of today, we understand that there are no set makers at this point who have changed their production base strategy. And so what we know is that in terms of how the policy is actually going to play out into the future, which direction that it will take, it is still open to fluctuation. It has not yet been completely determined. So hence, there are certain uncertainties. That is why we are very closely observing and following what is happening with regards to these policy implementation and we will come up with an appropriate countermeasure to deal with the developments that take place to make sure that we control the situation that we don't lose out on any business opportunity or that we don't so the developments don't undermine our profitability.

Moderator

I believe one of the things that you'll be most interested in is whether there are any critical issue points across our SCM, our supply chain. I can tell you that there are no critical issues that at this point we believe will exist. And also in terms of any pressures on our pricing, we believe that there is no price pressures that we'll be exposed to because of this issue. Yes. And then moving on to the second question about the sales of the entity that we have, the LCDT replanted Guangzhou.

Moderator

As per our disclosure that we have previously made, the amount of the sales proceed is the correct amount. There is almost no change to the figure that we had previously disclosed. And we've been informed that as of April, CSOT is running that plant at full capacity meaning that the plant is currently running without any significant issues. And in terms of the sales proceed, we are being paid meaning we are receiving that payment as per the payment schedule. And so with regards to this sales transaction, I can tell you that more or less the whole transaction is now closed.

Moderator

So in the first half of the year, we are looking forward to a meaningful amount of cash in into the company. Second part, I'm sure you're also interested as to where we will be using this sales proceed. The company's thoughts are that we would not be concentrating the use into one specific area. So we will not be using the whole amount to one certain area. We are mindful of different aspects in terms of urgency of certain business and preparations for the future and the operation.

Moderator

Now based upon the assumption that all of those factors that there are no issues, we will be making the decision as to where we will invest that amount. So let me backtrack on this and just give you a clear message on this. Basically, in terms of the cash flow requirement for our operations, we are able to fund that through the operational activities. So the sales proceeds that we will get, the cash flow that will come in, we will use part of it in improving the financial standing and also there need to there may need to be some investments that we make to better prepare for the future and to strengthen our business capabilities in terms of the OLED business.

Moderator

The following question will be presented by Woon Yo Kim from IBK Investment and Securities. Please go ahead with your question.

Moderator

Thank you. Would like to ask you three questions. Although the CFO gave us a quite good explanation on this, I just would like to follow-up by asking the external uncertainties does not seem very good. So I would like to understand whether you have made some adjustment into your business plan outlook going forward and particularly in relation to your strategic customers? Second question, also regards your strategic customers, there seems to be heightened level of competition amongst the suppliers.

Moderator

But to know whether that is impacting the amount of volume shipment that you're making to each of these customers or whether you're exposed continuously to any pressures, downward pressures on ASP. And then the third question is, in the second half, we always used to get new products. There is a rumor in the market that the new products will all be based on LTPO technology. If that is the case, what good news would that be for LG Display? Hello.

Moderator

I'm in charge of small display. Responding to your question, yes, there is definitely uncertainties coming out of the tariff related developments. But basically, customers are at this point diversifying their production base. So we expect that multiple companies will continue to pay close attention to how things go going forward. In terms of the smartphone business that we engage in, we have very strong capabilities and our strategic position is quite robust.

Moderator

So we are running our business as per our original business plan. But having said that, there may be downstream market volatilities. So we are in close communication with our customer base and we are fully prepared to nimbly respond to changes in the market. And competition amongst the suppliers and vendors have always existed, but we were able to prove our differentiating points by through timely supply of the products and volume to our customers and also through making appropriate preparations for upcoming future technologies. And through continuous cost innovations and strengthening of quality as well as other competitive factors, we were able to expand to the volume that we supply and through such commitments we will effectively respond to competitive landscape.

Moderator

So despite the fact that the first half of the year is usually the slow season, thanks to the trust that we have from our customers and our strategic positioning as well as our production capabilities, we expect there to be an year over year increase in volume. In the second half of the year, we will continue to see more expansion through the shipment volumes, especially coming out of the new models. So we expect to achieve Y o Y performance that is on par with what we've seen the previous year.

Moderator

The following question will be presented by Wonsup Jiang from IN Securities. Please go ahead with your question.

Moderator

Thank you for taking my question. I just have two very simple questions. Since you've discontinued your LCD TV business for your large business, I take it that you have to focus on your OLED business. But in light of the uncertainties and the demand and the fact that the high end market segment is currently stagnant, would like to understand what strategies you have in place? Second question is that on top of the tariffs as well as uncertainties in the market, I would like to know as to whether that drove any changes to your overall shipment plan.

Moderator

My name is Kim Jong Deok. I'm VP in charge of large display. I will take your first question on the profitability side. Basically, I can divide that into two pillars. We operate our business under a profit centric operational stance and it's made up of two pillars.

Moderator

First, in terms of responding to what the customers need, we are focusing and providing on differentiated product portfolio that has distinct product specifications as well as sizes. So by strengthening the portfolio, we will be responding to the need. And the second pillar has to do with an ever stringent cost savings effort. So through these two approaches, we are committed to stay in line with the plan towards the objective of enhancing the business performance. And the second part of the question, yes, we've decided to discontinue the LCD business, which means that in our large panel OLED business, we will focus our efforts to further enhance and notch up that business and things are going as planned.

Moderator

So looking overall at our large panel OLED business, because of the existing uncertainties in the market, we have linked actual demand of the market onto the capacity, the operation the operating capacity of our business. And also we've taken cost cutting activities to the extreme. That's the second part. And third, we've strengthened our cooperation with the global customer base. And fourth, we have expanded and differentiated LG displays, very distinctive products such as OLED monitors.

Moderator

So through these different efforts, we are really strengthening our earnings structure. So from a mid to longer term perspective, we're seeking to drive growth in terms of volume, which will bring us a steady performance. So OLED is actually at the top of the product lineup at the top tier customers and OLED itself has a top tier positioning in the market. We do expect that there will continue to be competition against LCD, but underpinned by the very distinctive value that only OLED can offer, we are committed to strengthening its positioning in the high end segment of the market. Regarding your question on tariffs, our CFO has provided you with the overview or the high level explanation regarding tariffs.

Moderator

But with respect to the changes in the tariff policies that hinges on the TV set, there has been some mixed impact. But I can tell you that for now in terms of the large panel business, the TV set business, the impact at this point we believe is quite limited. But going forward, subject to how the tariff policy is actually going to play out into the future, The entities that will directly be impacted are the set makers. So we are committed to doing our best to make sure that we secure flexibility in terms of supply against our customers. We'll take the next question.

Moderator

The following question will be presented by Sung Kim from Kiwun Securities. Please go ahead with your question.

Moderator

I will ask two questions on your IT panel business. The demand for IT panels and the uncertainties is continuing and persisting. So what is your outlook for the IT product demand by each different product segment for year 2025? Second question is, not just LG Display, but your peers have all been able to up their technology standards. The standard itself has become very elevated.

Moderator

So how do you differentiate yourself in the market? How can you continue to sustain your competitiveness in the high end segment of the IT market? And also, do you have with regards to the IT LCD efficiency planning, what are some of the ways for you to improve on your profitability as you go forward? Yes. I am An Yu Shin.

Moderator

I am in charge of medium display responding to your question. Originally, we were looking forward to some positive impact coming from the replacement demand and the discontinuation of Windows 10 having a triggering market demand in the high end as well as the B2B market. But at this point, with the talk of the reciprocal tariff that will be imposed by The U. S. And with the prolongation of the macroeconomic uncertainties, we do need to closely and continuously monitor how the demand dynamic changes as we go into the future.

Moderator

So depending on the decision on the imposition of the tariff by different countries and the extent of that tariff, the actual impact could surface quite differently depending on which product segment you're talking about and depending on different geographies. So there are potential for continuous volatility to emerge in the downstream market. So we are committed to very closely communicating with our customers in regards to the market situation and respond accordingly. So we have technological edge in terms of high end LCD technology that includes the IPS black and next generation oxide technology as well as in tandem OLED that's known for high luminance, low power and long life. And underpinned by these technological strength, we are able to offer the most optimized portfolio that best fits the needs of the customer for each of the product segments.

Moderator

And that is the way in which we respond to competition. Now going forward, our forecast is that there will be growth from the OLED monitor market on top of the AIPC growth from a mid to longer term perspective. And hence, we believe that our capabilities in the mid to large OLED, especially on high picture quality and low power solutions, our competitiveness will be further solidified as we move into the future. So by bringing such differentiated technologies to bear on the products that we offered, we will be able to continuously lead the market as we have a very solid base of Tier one customer base and that really works to our advantage. So across the entire IT segment, the level of competition between and amongst the panel providers is becoming more fierce.

Moderator

However, through very stringent cost innovation as well as operational achievement of operational efficiencies and really focusing on our top tier customer base and through strengthening the partnership that we have, we will continuously and gradually notch up our profitability. We will take the final question before we close.

Moderator

The last question will be presented by Jung Hyun Yoon from UBS. Please go ahead with your question.

Moderator

Thank you for taking my question. My question relates to your auto business. Can you provide us some color on what your take is for your short term and mid to longer term outlook for your auto business? And also, what's the forecast for LG Display's auto business growth and profitability going forward? I am Seung Ki Hwan.

Moderator

I'm VP in charge of auto marketing. If you look at the greater auto market, we are in the gradual recovery phase, but there are certain issues that have newly emerged such as the tariff issue as well as the slowing of the EV growth and the OEMs in Europe and U. S. Have been experiencing quite a bit of stagnation. Because of all these factors, this year, we expect that it will be quite difficult for the overall auto market to report more than 90,000,000 units of vehicles.

Moderator

But having said that, fortunately, if you look at in vehicle display, regardless of whether a car is an EV or IC, we see on a per vehicle basis, the percent of adoption of such displays is increasing and we see accelerated speed of shift to a larger tunnel. And so we are looking forward to growth, continuous growth this year of LTPS LCD and OLED market. So the auto business since 2020 for the past four years, it posted a growth on a CAGR basis of around 10% over the past four years. So from a mid to longer term perspective going forward, at least for three years to come, we're expecting a steady growth trend. And compared to our peers and competitors, we were successful in transitioning to LTPS LCD and supported by large scale OLED orders, we hence expect and project there to be steady growth.

Moderator

In particular, for our OLED display product, we started with customers in Europe and U. S. And now we are able to expand to customer base in Korea and Japan as well. So going forward, in three years' time, we are expecting to triple the revenue compared to where we are today. And going forward, we will actively leverage new technologies such as pillar to pillar display, switchable privacy and tandem, which are OLED and LCD differentiated technologies that we have supported by these new techs.

Moderator

We will further strengthen our top line revenue as well as our bottom line and solidify our leadership in the market.

Analysts
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Key Takeaways

  • LG Display reported Q1 revenue of KRW 6.653 trillion (up 15% YoY) and an operating profit of KRW 33.5 billion, marking a profitable first quarter for the first time in eight years, with EBITDA of KRW 1.231 trillion (20% margin).
  • The share of OLED products rose to 55% of total revenue (up 8 pp YoY), driven by the company’s OLED-centric structural upgrades and cost-saving initiatives.
  • For Q2, LG Display expects area shipments to decline by mid-20% due to the discontinuation of LCD TV production, while ASP per square meter is projected to increase by around 20%.
  • Cash and cash equivalents stand at KRW 982.3 billion, but rise to about KRW 2.37 trillion when including proceeds from the Guangzhou plant sale, which is now nearly complete and will support OLED investments and balance-sheet improvement.
  • 2025 capital expenditures are planned at mid-to-low KRW 2 trillion, maintaining a profit-focused and conservative investment stance to maximize existing infrastructure and prioritize profitability.
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Earnings Conference Call
LG Display Q1 2025
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